India's telecom commission, the top decision-making government body for the telecom sector, has rejected TRAI's proposal to levy an administrative charge on firms winning 3G spectrum in an auction.
Last week TRAI has proposed that successful 3G bidders pay 2 per cent of the highest bid amount annually as administrative charges for using the spectrum (See: DoT and telcos unhappy with administration charges for 3G). However, the department of telecom (DoT) warned the Telecom Commission against approving this tax as it would reduce the revenue received from the January 2009 auctions for 3G spectrum by about Rs5,000 crore.
To resolve the issue the matters have gone to the higher levels. The telecom commission has asked the cabinet committee on economic affairs (CCEA) to submit its views on the issue.
The commission has also sent a note explaining the reasons behind its move to Prime Minister Dr Manmohan Singh, as the administrative tax issue involves the finance ministry, which is currently being handled by the PM. All issues need to be resolved before the auctions start. The government is keen that the auctions do not get postponed due to the upcoming elections in middle of next year.
There are three key issues that need to be resolved -- the number of 3G players in a circle, 2 per cent administrative fee proposed by TRAI, and the revised spectrum charges ranging between 3 and 8 per cent for telecom operators.
The Telecom Commission will also take a decision on a proposal suggesting increasing the minimum annual spectrum charges to three per cent of gross revenue for 4.4 MHz spectrum from existing two per cent.
The spectrum availability is different in all 22 telecom circles in the country and there is no 3G spectrum in Rajasthan and North East. Also, there is no surety of spectrum vacation by Defence services.
Some of the key recommendations made by TRAI:
- Two per cent of the highest bid amount as annual administrative charge during the validity period of 3G spectrum
- As the operators will take time to roll-out their services after the allocation of spectrum, therefore TRAI recommended a moratorium of one year from the date of allocation of spectrum in respect of payment of administrative charge
- The standalone 3G operators who do not have any allotment of 2G spectrum should also pay an annual spectrum charge of 3 per cent of annual adjusted gross revenue (AGR), which is equivalent to the lowest slab of 2G operator, besides the administrative charges
- All available spectrums in 2.1GHz including anticipated spectrum availability within the next one year is put to auction so as to maximize the number of 3G service providers
- The availability of 3G spectrum including anticipated should be put in public domain for the knowledge of bidders. It becomes particularly relevant as DoT has already decided to allocate spectrum to BSNL and MTNL. Therefore, it is essential that the principle of level playing field is urgently restored by putting all available spectrum for auction